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Marketing Intelligence & Planning
Brand equity for online companies

Rosa E. Rios Hernan E. Riquelme
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Rosa E. Rios Hernan E. Riquelme, (2008),"Brand equity for online companies", Marketing Intelligence &
Planning, Vol. 26 Iss 7 pp. 719 - 742
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Brand equity for

Brand equity for online online companies
companies
Rosa E. Rios
Australian College of Kuwait, Safat, Kuwait, and 719
Hernan E. Riquelme
Kuwait-Maastricht Business School, Salmiya, Kuwait Received 1 May 2008
Revised 1 July 2008
Accepted 1 July 2008
Abstract
Purpose The purpose of this paper is to determine if the traditional approach to measuring brand
equity applies to online companies.
Design/methodology/approach This objective is pursued by: developing a measurement model
of brand equity for online businesses; and testing the nomological validity of the model using
structural equation modelling.
Findings This study finds partial support for the application of the offline brand equity theoretical
framework based on brand awareness, brand associations and loyalty for online companies. Brand
loyalty and brand value associations directly create brand equity.
Research limitations/implications The study is cross-sectional, the indicators or observable
variables used in this study may not be deemed comprehensive enough, no interaction effects have
been incorporated, and finally, the research study was based on a few online business retailers.
Practical/implications The results support the view that a consumers perceived sense of value
resulting from a transaction with an online business develops loyalty. Also, brand-trust association
and brand awareness indirectly contribute to creating brand equity through their influence on loyalty.
Loyalty is by far the most important source of brand equity because of its direct influence and
mediating role in creating brand equity.
Originality/value While many studies have identified and ratified the importance of brand equity
dimensions among traditional firms, few have tested the model with online companies.
Keywords Brand equity, Electronic commerce, Internet shopping, Consumer behaviour
Paper type Research paper
Introduction
Research interest in brand equity and branding has been an important topic of research
in the marketing area. The brand equity construct refers to the added value a brand
name gives to a product or service (Aaker, 1991). Brand equity empowers companies to
negotiate lower costs of distribution, increased effectiveness in marketing
communication, and expanded growth opportunities from brand extensions and
licences (Yoo and Donthu, 2001).
Notwithstanding its importance, this concept has rarely been applied to assess
online companies. Perhaps, this reflects the belief that the key principles of how to
develop the brand remain the same on the Internet (Rubinstein and Griffith, 2001,
p. 332). Alternatively, it might be that the Internet makes brands irrelevant as Marketing Intelligence & Planning
Vol. 26 No. 7, 2008
consumers have cost-free access to a large amount of information about product pp. 719-742
characteristics, including prices, which tends to convert products into commodities q Emerald Group Publishing Limited
0263-4503
(Chen, 2001; Dussart, 2001). Early studies by economists have concluded that, despite DOI 10.1108/02634500810916681
MIP the potential of the Internet to make markets perfect, customer are still willing to pay a
26,7 premium price of 6.8 per cent for commodity products like books and CDs when bought
from Amazon.com rather than CDNow (Lynch and Ariely, 2000). While many studies
to date have identified and ratified the importance of brand equity dimensions among
traditional firms, few have tested the model with online companies.
The contention in this paper is that traditional consumer-based brand equity
720 measures and concepts for online companies differ in degree, not kind, from a
packaged-goods brand equity point of view. One difference is that online businesses
are mainly services, and in these the source of the experience is the locus of brand
formation (Berry, 2007, p.130). Second, in a computer-mediated environment the
companys web site is the experience (Dayal et al., 2000; Taylor, 2003). This is different
from the experience consumers have in an offline business environment where they can
interact with people rather than technology. Third, it is argued that brand equity has
some specific and differentiated antecedents for online retail brands for example,
related to the web site design (security assurance, accessibility, navigationally) and
wider product assortment among other features (Page and Lepkowska-White, 2002).
Fourth, given that online businesses are mainly intangible and therefore difficult for a
consumer to judge them from tangible cues, an association with trust must be created.
Trust plays a critical role in this type of business, much more so than with offline
businesses where consumers can interact with physical and tangible features to infer
trust (Berry, 2007). Finally, if we conceive the online businesses as retailers, retailer
brands are sufficiently different from product brands that the actual application of the
branding principles can vary (Ailawadi and Keller, 2004, p. 332). Overall, it is possible
to conceive that it is not only more difficult to create brand equity on the Internet,
but also there are different ways to create it.
The main objective of this study is to determine if the traditional approach to
measuring brand equity applies to online companies. This objective is pursued by:
(1) developing a measurement model of brand equity for online businesses; and
(2) testing the nomological validity of the model.
This paper is organised as follows. Firstly, current literature of brand equity is
discussed, second, a research framework is presented and justified, third, a description
of the methodology and findings are reported and finally, the findings and their
implications are explained.
Literature review
Few theoretical and empirical studies have tried to identify sources of brand equity and
the variables that may influence online brand equity sources. In perhaps one the first
brand equity frameworks developed for online companies, Page and Lepkowska-White
(2002) posited that web equity (i.e. brand equity for online businesses) can be created
similar to offline product-brand equity, namely by influencing two main dimensions
(image and awareness), and proposing that loyalty is an as an outcome of web equity.
Page and Lepkowska-White (2002) suggested several marketer and non-marketer
communication activities to develop awareness and brand image. Some of these are
web-specific design features and advertising tools (e.g. interstitials and banners), but
others are traditional ones such as customer service and product-related characteristics
(quality, selection and price). Page and Lepkowska-Whites web equity model seems to
imply, by using dimensions awareness and image, that traditional measures of brand Brand equity for
equity can be applied to gauge online business (or to use their terminology, web online companies
equity), and that the main difference is in the marketing mix drivers. However, the
model is at odds with Aakers (1996) model, which considers loyalty as a driver of
equity rather than an outcome. The web equity conceptual framework seems to assume
that in the on line environment the web site is the brand. However, the authors do not
provide any justification for this assumption. 721
Na and Marshall (2005) share Page and Lepkowska-Whites view that brand equity
is conceptually the same for any brand, and that the models for brand equity that work
for offline products and services will work for online too. Based on this predicated
view, the authors used 17 independent measures (all single items) to predict web visit
and preference to derive what they call a cyber-brand power. The measures were
reduced to three factors through exploratory factor analysis. The factors, accounting
for 60 per cent of the variance of the data, were named: experiential (enjoyment,
sociability, character, layout and user friendly); informational (defined in part by
globalisation, web interface, richness of information) and familiarity. The cyber-brand
power seems to assume that the experiential, informational and familiarity factors
constitute sources of brand equity as they represent image, which is a source of brand
equity. However, there is no major justification to relate these factors (except for
familiarity) directly to brand equity. Furthermore, the simple regression model is not
the most appropriate model to develop or test theory, although it may be for predictive
purposes. Much of the success of regression models comes from the fact that tasks they
have been used for involve cues that are conditionally monotonic with some criteria
(Yntema and Torgerson, 1961).
Christodoulides et al. (2006) propose an alternative model of retail brand equity for
Internet companies called Online Retail/Service (ORS). The ORS brand equity model is
based on five dimensions: emotional connection, online experience, responsive service
nature, trust and fulfilment. The authors define online (ORS) brand equity as:
a relational type of intangible asset that is co-created through the interaction between
consumers and the e-tail brand (Christodoulides et al., 2006, p. 803). This
conceptualisation of retail brand equity differs from the more traditional definition
that says: a retailers brand equity is exhibited in consumers responding more
favourably to its marketing actions than they do to competing retailers (Ailawadi and
Keller, 2004, p. 332). It also differs from the alternative highly consensual definition of
brand equity as an outcome that accrues to a branded product compared to those that
would accrue to an unbranded alternative (Keller, 2003). Christodoulides et al.s ORS
brand equity measurement model consists of five constructs, namely: emotional
connection, online experience, responsive service nature, trust and fulfilment.
Interestingly, awareness is not a dimension among the sources of brand equity for
the retail and online services, contrary to what is professed in the customer-based
brand equity literature. According to Keller (2003, p. 102), brand equity occurs when
the consumer has a high level of awareness and familiarity with the brand.
Awareness, although intuitively appealing in the consumer-based framework, has not
been without its problems. The customer-based brand equity studies by Yoo et al.
(2000) and Yoo and Donthu (2001) did not find empirical evidence to separate brand
awareness from brand associations therefore, they condensed them into one
dimension. A replication of this study by Washburn and Plank (2002) concluded the
MIP model that condensed awareness and associations had a better fit than the one that
26,7 kept them separate.
Possibly all of the proposed five measures in the ORS, although conceived as drivers
of brand equity, could included as reflecting brand associations emanating from the
attributes and reactions to a web site (brand). Hence, it is not clear why the traditional
consumer-based framework of brand equity could not apply to the retailing online
722 businesses. Notwithstanding, the fact that the model deviates from established brand
equity conceptual models, the ORS brand equity suggests to study brands as a
relational asset following the relational marketing paradigm (Argyriou et al., 2005).
To recapitulate, the first attempts to measure brand equity for online companies
have been scarce and the proposed frameworks rarely tested. Consequently, further
research is needed to understand the applicability of the consumer-based brand equity
framework developed from packaged-branded products and, by extension, the
dynamic among the sources of brand equity.
Theoretical framework and hypotheses

The framework presented here draws on a traditional brand equity model and is
depicted in Figure 1. The model indicates that brand awareness and brand associations
(in the form of perception of value and trust) and loyalty create brand equity. Brand
equity is reflected in the premium price a consumer is willing to pay for a particular
brand in comparison to another. Ailawadi and Keller (2004) pointed out that several
researchers (Aaker, 1991, 1996; Park and Srinivasan, 1994; Chaudhuri and Holbrook,
2001; Ailawadi and Keller, 2004) have considered price premium as a measure of brand
equity.
A structural model approach is used to test the measurement model and its
nomological validity. This research assumes the companys (web site) brand name
(as in the brand name Amazon) rather than a product or service brand, since online
companies sell different products. It is also assumed that the online business web site is
representative of the business, and that there is a relationship between the web site and
the user. Arguments supporting this assumption are as follows. First, in a
computer-mediated world, a consumers main interaction is with the web site, and this
is important because of its influence on the consumers perception of the company on
the Internet this experience is the brand (Dayal et al., 2000; Taylor, 2003). Secondly,
most Internet companies, as well as the worlds great brands, are corporate names
(Argyriou et al., 2005).Thirdly, previous studies seem to suggest that consumers do not
Value
H2
H5 H9
H1 BE
Awa H4
H7 Loyalty
H6
Figure 1. H8
Structural equation model
of online brand equity Trust H3
perceive the web site as a separate entity from the business behind it (Li et al., 2006). Brand equity for
Fourthly, there are stores with such strong names that consumers do not make the online companies
distinction between the store and the brand (Grewal et al., 2004). The following section
outlines the justification of the traditional brand equity sources and the selection of the
constructs to model online brand equity.
Awareness. Does consumer awareness play as an important role for online
companies as it does for offline ones? A study by Smith et al. (2000) found that three 723
unbranded retailers with the lowest prices, made up only 26 per cent of consumer
choices. Even more, 51 per cent of price-minded shoppers did not choose the shopbots
(price comparison web site) cheapest offerings, and shoppers were willing to pay a
3.1 per cent premium for a brand name.

Furthermore, consumers were willing to pay a 6.8 per cent premium price when
purchasing products from an online store where they had shopped before. Brand
equity, whether online or offline, cannot be created unless consumers recognise and
recall the brand forming associations in their minds. Brand recognition relates to the
consumers ability to confirm prior exposure to the brand when given the brand as a
cue (Keller, 2003). Brand recall relates to the consumers ability to retrieve the brand
from the memory when given the product category, the needs fulfilled by the category,
or purchase or usage situations as a cue (Keller, 2003). It is not surprising, therefore,
that online companies spent millions of dollars advertising in the early days of Internet
commerce. Recently, Woodside and Walser (2007) confirmed that ready mental access
to a brand is associated strongly with building strong retail brands. From the previous
justification the following hypothesis is proposed:
H1. Brand equity is related positively to the extent to which consumers are aware
of the online business brand.
Brand association: value

Unlike Aaker (1996), who treats associations of quality separate from the value and
trustworthiness products and companies create, the proposed model in this paper
singles out the associations of value and trust because of the relevance to online
businesses as justified next.
There is some literature suggesting that consumers are not likely to draw a
distinction when making quality and value judgments (Holbrook and Corfinan, 1985;
Netemeyer et al., 2004). Zeithaml (1988) suggests that perceived quality reflects an
overall judgment; however, others feel differently that is, quality (as an attribute and
benefit) results in an overall perceived value judgment (Keller, 1993).
Aaker (1996) himself, although conceiving brand quality associations as a separate
construct from value associations, warns of the existing high correlation (80 per cent
according to an Equitrend study) between perceived value and perceived quality as
sources of brand equity. Finally, it has been suggested that the manner in which value
judgments are formed are theoretically similar to the way quality judgments are
formed therefore the two constructs can be combined to form an overall summary
construct of brand attitude (Aaker, 1996). In addition to the previous arguments, and
because structural equation modelling is sensitive to a high correlation between latent
variables, only perceived value is used in this research.
A value proposition is a multi-dimensional construct conceived in different ways: a
competitive price, convenience, accuracy and quality of product information (Burke,
MIP 2002; Ward and Lee, 2000), value for money (Zeithaml, 1988), shopping convenience,
customer service, broad or specialised product assortment (Anckar et al., 2002) and
26,7 after-sales care (e.g. customer returns). From the above evidence, the following
hypothesis is proposed:
H2. Brand equity is related positively to the extent to which consumers perceive
brand value in the online business.
724
Brand association.
Trust. Among his measures of associations, Aaker (1996) considers trust as a
characteristic of organisation associations as one among many others, thus

de-emphasising its importance. In this research study, given that trust is a critical
factor for online businesses (Ha, 2004; Tan and Sutherland, 2004; Pennanen et al., 2007),
the concept of trust is emphasised and, therefore, used as a distinctive source of equity.
Consumers inability to trust websites has been one of the main deterrents to
conducting online transactions. This lack of trust emanates from three sources:
security/privacy, electronic fraud, and disreputable new merchants (Gorriz, 2003).
The literature on consumer privacy on the Internet indicates that consumers are
primarily concerned about the improper use of data that companies collect on line
(Rohm and Milne, 1998; Miyazaki and Fernandez, 2001), and so restrict their purchases
via the Internet (Berman and Mulligan, 1999; Brown and Muchira, 2004). Because
consumers need to trust merchants to purchase online, websites that give consumers
peace of mind will create more brand equity and patronage. The following hypothesis
is proposed:
H3. Brand equity is related positively to the extent to which consumers trust the
online business brand.
Loyalty. Customer loyalty has been deemed the foundation of brand equity (Aaker and
Joachimsthaler, 2000; Clarke, 2001) because a brands value is worth as much as the
number of consumers willing to pay the price asked. Loyalty involves a behavioural
and attitudinal component (Jacoby and Chestnut, 1978; Keller, 1993). The former is
measured by repeat purchase; the latter as a positive attitude disposition towards the
brand reflected in active word-of-mouth engagement about the company (Clarke, 2001).
Not surprisingly, loyalty has been defined as a favourable attitude toward a brand
resulting in consistent purchase of that brand over time (Assael, 1992). Loyalty online
has proved to be significantly related to word-of-mouth and willingness to pay more
(Srinivasan et al., 2002). More recently, Rafiq and Fulford (2005) confirmed the
influence of loyalty on word-of-mouth and the transference of offline loyalty to online.
Customers who bought from a brick and mortar supermarket in the UK also tended to
use its online store and recommended their grocers web site to others. The following
hypothesis derives from the above:
H4. Brand equity is related positively to the extent to which brand loyalty is
evident in the online business.
In addition to the above hypothesised relationships, there are suggestions in the
literature that the dimensions could have a potential causal order (Agarwal and Rao,
1996). Aaker (1991) indicates that loyalty can be influenced by the other dimensions of
brand equity, namely perceived quality. Similarly, Yoo and Donthu (2001) note a
hierarchy of effects among brand equity dimensions. They posit that awareness and Brand equity for
associations precede perceived value and that, in turn, will influence attitudinal loyalty. online companies
The relationship of familiarity (in this case the associations and awareness consumers
have about the business web site) has been said to reduce social uncertainty and
complexity as a result, consumers are more inclined to trust an online business (Chau
et al., 2006). Yoon (2002), who studied the antecedents of trust among Korean students,
found that awareness and reputation are significantly associated with web site trust. 725
This research therefore suggests that:
H5. Brand awareness is positively related to association of brand value.
H6. Positively related to association of trust.

The relationship of customer value to trust has been theoretically claimed (Singh and
Sirdeshmukh, 2000; Urban et al., 2000; Graebner-Kraeuter, 2002), however, infrequently
demonstrated empirically. In a study involving online bookstores and travel agencies,
Harris and Goode (2004) concluded that trust is significantly influenced by perceived
value, and perceived value also influences loyalty. Therefore, it is hypothesised that:
H7. Perceived value is positively associated with trust.
Trust has been at the centre of studies that aim to explain loyalty. Pitta et al. (2006) note
that, in a perfect world, trust is unnecessary, but in the real world it reduces the
perceived risk by decreasing the possibility of incurring a loss. Rauyruen and Miller
(2007) cite Reichheld and Schefter saying that to gain loyalty of customers, one must
first gain their trust. This relationship between consumer trust and loyalty has been
supported in several studies (Morgan and Hunt, 1994; Mayer et al., 1995; Harris and
Goode, 2004). In the online world, trust has been found to be even more important in
creating loyalty because of the absence of physical stores or the physical touch of the
product (Reichheld et al., 2000).
Recently, Chiou and Droge (2006) found that trust had a direct effect on attitudinal
loyalty and an indirect one through satisfaction. Floh and Treiblmaier (2006)
corroborate that satisfaction and trust were statistically significant influencers of
loyalty in the online banking sector, and that age moderated positively the relationship
between trust and loyalty. Hence, this research posits:
H8. Trust is positively related to loyalty.
The relationship of perceived customer value to loyalty has been claimed theoretically
in the literature by several authors too (Peterson et al., 1977; Cronin et al., 2000). Pitta
et al. (2006), using the consumer pyramid concept, proposed that to build loyalty and
trust (the top of the pyramid) companies need to offer value and create relationships.
Sirdeshmukh et al. (2002, p. 32), in empirical tests of the relationship between the role of
value in trust-loyalty relationships, found that the effect of trust on loyalty is
conditional on its ability to create value for consumers, and that value emerges as the
consistent, significant, and dominant determinant of consumer loyalty. Loyalty for
online bookstores and travel agencies is significantly influenced by the perception of
value customers entertain about these online businesses (Harris and Goode, 2004).
Therefore, the following hypothesis is proposed:
H9. Loyalty is positively related to perceived value.
MIP Method
26,7 Development of measures
The instrument (a self-administered questionnaire) contained 24 items that measured
the four sources and outcomes of brand equity. The items were assessed on a
seven-point Likert scale where 1 stands for very strongly disagree and 7 for very
strongly agree. We derived measures for several constructs in our framework from
726 existing scales or studies in the literature. The resulting items and their sources used to
reflect the various dimensions are shown in Table I.
Two measures are used to capture the multi-dimensionality of the brand equity
construct. One reflects the price premium and is worded:
I am willing to pay a premium price of up to 10 per cent when purchasing from [X online
business] as opposed to a less well-known online business.
Ailawadi and Keller (2004) have pointed out that several researchers (Aaker, 1991,
1996; Park and Srinivasan, 1994; Chaudhuri and Holbrook, 2001; Ailawadi and Keller,
2004) have considered price premium as a measure of brand equity[1]. The premium
price mentioned in the question (10 per cent as a maximum) was derived from Smith
et al.s (2000) findings that consumers were willing to pay a premium of 6.8 per cent
when buying from an online store where they had shopped before. Although the
10 per cent is slightly higher than the findings, it may still be in the low range
considering that price dispersions online have been reported of up to 33 per cent
(Riquelme, 2001). The second outcome measure of brand equity reflects repurchase
intention. Intention to purchase and re-purchase have been used as brand equity
outcomes since they both manifest themselves in market share (Simon and Sullivan,
1992; Agarwal and Rao, 1996), which is a benefit accrued to firms from brand equity.
Three observable variables were adapted from the literature to measure the
construct loyalty: It makes sense to buy [X online business] instead of any other online
business, even if they are the same, even if another online business has same features
as [X online business], I would prefer to buy from [X online business], I would
definitely recommend [X online business] to friends, neighbours and relatives. (Yoo
and Donthu, 2001; Suppehellen and Nysveen, 2001; Sirdeshmukh et al., 2002).
In this study, we refer to online trust, which differs from offline trust. Online the
object of trust is the business web site itself and includes consumer perceptions of
privacy, security and overall consumer confidence in the online business (Bart et al.,
2005). The items adapted to measure this construct are: It feels safe to disclose personal
information in [X online business], and it feels safe to conduct transactions in [X online
business] and [X online business] has my confidence (Yilmaz and Hunt, 2001; Burke,
2002; Wang et al., 2004).
Value associations refer to customers perceived preference for and evaluation of
those product attributes, attribute performances, and consequences arising from use
that facilitate (or block) achieving the customers goals and purposes in use situations
(Woodruff, 1997, p. 142). This definition is broader than definitions that focus on
give-versus-get, such as the price/value trade-off (Parasuraman, 1997). Perceived
customer value can be derived from many sources, including among others:
competitive price (price is not only perceived as cost but also a benefit); superior
shopping convenience; superior customer advice; and breadth and depth of
product/service availability (Alba et al., 1997, Anckar et al., 2002).
Brand equity for
Dimension Items
online companies
Web
Awareness I know what [X online business] looks like
I can recognise [X online business] among other competing online
businesses
Source (Yoo and Donthu, I can quickly recall the name of [X online business] 727
2001)
Some characteristics of [X online business] come quickly to mind
I have difficulty in imagining [X online business]
Value
Associations (Anckar et al.,
2002; Lennon and Harris,
2002; Netemeyer et al., 2004)
Competitive price I prefer [X online business] because price deals are frequently offered
I have a preference for [X online business] because it frequently offers an
updated list of product promotions (sales)
In [X online business] I can make the most for the least money
In [X online business] I can find the lowest prices for a quality brand
I cannot find quality products at an affordable price in [X online
business]
Value
Shopping convenience I have a preference for [X online business] because it allows the
comparison of product prices across online stores
I like [X online business] because it allows to track my orders
I like [X online business] because it offers alternative forms of payments:
cash on delivery, credit cards, money order
Value
Breadth and depth I like [X online business] because one can find the broadest range of
merchandise products
I have a preference for [X online business] because it provides the
deepest specialized assortments
Value
Compensation [X online business] is good because it allows returns to be shipped back
at retailers cost
Trust associations
Source: (Wang et al., 2004; It feels safe to disclose personal information in [X online business]
Suppehellen and Nysveen, It feels safe to conduct transactions in [X online business]
2001) [X online business] has my confidence
Loyalty
Source (Yoo and Donthu, It makes sense to buy from [X online business] instead of any other
2001) online business, even if they are the same
Even if another online business has same features as in [X online
business] I would prefer to buy from [X online business]
I would definitely recommend [X online business] to friends, neighbours
and relatives Table I.
Brand equity Items used in the study
Source: Netemeyer et al., Im willing to pay a premium price of up to 10 per cent when purchasing (items in italic were
2004; Yoo and Donthu from [X online business] as opposed to a less well known retained in the final
(2001) Faircloth (2005) I would definitely buy from [X online business] solution)
MIP Web awareness is the consumers ability to quickly recall and recognise a companys
26,7 branded web site. The measures go beyond simple dichotomous question of awareness
(being aware or not). The observable variables used to measure the web awareness
dimension were based on the work of Yoo et al. (2000) and Washburn and Plank (2002).
Participant recruitment and sample

728 Subjects for the study were undergraduate and graduate students from a large
university in Australia. There were 1,026 students contacted in various classrooms
to participate in the survey. The use of student samples has sometimes been
questioned on grounds of external validity because of their unique characteristics and
unrepresentativeness of the real population (Lamb and Stem, 1979; Burnet and
Dunne, 1986; Wells, 1993). Students are usually considered poor surrogates for the
actual people because they are asked to take a position as if they were other subjects
(e.g. a CEO). However, the following reason suggests that the sample used in this study
may not represent, significantly, a threat to external validity. This study does not
require subjects to take an imaginary position.
The data used consisted of 795 cases. Of these, 503 had bought from one of four
online businesses: Amazon, e-Bay, CDNow, and Dell. Another 292 respondents, who
had not shopped any of the stimuli but assessed and bought from an alternative online
retailer, were used as a validating sample.
Results
Measurement model evaluation
The sample of 503 responses contained 58 per cent men and 42 per cent women. The
single largest group was between the 22 and 27 years of age, which represent the online
consumers prototype who are reported to be younger and well-educated (Nunnally and
Bernstain, 1994).
The sample included individuals who had a considerable level of Internet
experience i.e. more than seven years (49.6 per cent), had access to a high-speed
connection and used the Internet every day. Data were explored in terms of normality
and outliers. The data presented moderate deviations from normality however,
previous studies have noted the robustness of maximum likelihood (ML) to violations
of normality in terms of parameter estimates under moderately non-normal data
(Anderson and Gerbing, 1988; Curran et al., 1996; Ping, 1996; Marsh et al., 2004).
Online brand equity measurement model

Consistent with suggestions on measurement development (Straub, 1989), successive
statistical tests and refinement were performed on the data as explained below. The
initial run of confirmatory factor analysis revealed, through its modification indices
and standardised residuals (. 2.58), the existence of correlated errors. Adding
covariances between errors is particularly difficult to justify however, it is not
unusual to find some common method biases, even in the field of marketing (Podsakoff
et al., 2003) that account for at least part of the error covariance. An examination of
item one (I know what [X online] looks like) and two (I can recognise [X online] among
other online competing online businesses) may explain why a method bias is present.
This may be the result of a carry-over effect associated with a prior item thus the
respondent might have used the easily accessed item one to answer item two,
although these items were intermixed in the questionnaire. The carry-over effect might Brand equity for
have also been influenced by the wording or content of the items, thus, respondents online companies
could have attempted to maintain consistency in their responses to these items
(Hair et al., 1992).
After adding the covariance of the errors and deleting variables that suggested
cross loading, the resulting model illustrated in Figure 2 yields a chi square x 2 60.29
df 28, p 0.0003. The x 2 low probability indicates that the model fails to pass the 729
exact-fit x 2-test. The sensitivity of the likelihood ratio test to sample size, which
assumes a perfect fit, has been questioned (Byrne, 1998), therefore other indices have
been suggested. The most cited indices and their values for the improved model are:
RMSEA 0.048, p-value for test of close fit 0.56, NNFI 0.99, CFI 0.99,
SRMR 0.02 and GFI 0.98. An inspection of these values indicates a good fit.
0.32 q1
0.12
0.82
0.26 q2
0.86
awa 1.00
0.87
0.25 q3
0.75
0.41 q5 0.77
value 1.00 0.41
0.82
0.32 q6
0.79 0.40 0.41
0.37 q7 trust 1.00 0.46
0.90
0.19 q22 0.90 0.75
loy 1.00
0.18 q23
0.93
0.14 q24 0.87
0.24 q25
Figure 2.
Online brand equity
measurement model
Notes: 2 = 60.29; df = 28; p-value = 0.00037; RMSEA = 0.048
MIP Discriminant validity
26,7 Although there is no firm rule for discriminant validity, correlations with other latent
variables or constructs less than j0.70j are frequently accepted as evidence of it
(Bagozzi et al., 1991). The correlations between constructs range between 0.41 and 0.78,
and are all statistically significant at p 0.05. Since two correlations are beyond 0.70, a
measurement model that constrained the correlation equal to 1 was run for the highest
730 correlation (0.78). The chi square difference (x 2 107.36 2 x 2 60.29) equals x 2 47.07,
and with 1 degree of freedom, the p value 0.0000, indicating that the two constructs
are distinct from one another. A comparison of the shared variances between factors,
with the average variance extracted (AVE) from the individual factors factors, also
confirm confirms discriminant validity (Hair et al., 1998). AVE values are shown in
Table II.
Convergent validity
The convergent validity of the measures was assessed by observing the t-values and
by measuring the composite reliabilities of each construct. T-values range from 17.27
to 29.11, and are all statistically significant at p 0.0000. Composite reliabilities range
between 0.73 and 0.81. All statistically relevant measures of the dimensions of online
brand equity are disclosed in Table II.
An exploration of the squared multiple correlations of the observable variables also
suggest that the variables are reasonably successful as measures of the latent variable.
Squared multiple correlations range between 0.50 and 0.86.
To summarise, a model based on dimensions of awareness, associations of value
and trust, and attitudinal loyalty seem to fit the data well. The measures in the
measurement model have adequate reliability, convergent and discriminant validity. In
addition, the power estimate for the test of close and exact fit is 1.000, based on
MacCallum et al. (2000, p. 258) method.
To conduct the cross-validation, a sample of 292 respondents who had not
bought from the online businesses under study was used. The results from fitting
the final model to the new sample data indicate that, on the whole, the
goodness-of-fit measures paint a reasonable picture as most of the key criteria take
values consistent with recommended thresholds: NNFI found equals 0.98 and
CFI 0.98, RMSEA 0.07, ECVI 0.387; 90 per cent confidence interval for
ECVI (0.333; 0.451).
Structural model estimation

Direct effects of brand equity sources on brand equity. The summary of the structural
relationships and standardised parameters are reported in Table III. The chi 2 of this
model is 142.07 with 45 degrees of freedom and RMSEA 0.065, 90 per cent
confidence interval for RMSEA 0.053-0.078, CFI 0.99, NNFI 0.98,
SRMR 0.03 and GFI 0.96. All these indices, except for the statistically
significant chi square probability, are indicative of a reasonably well-fitting model.
Two of the hypothesised direct relationships of brand equity sources with brand
equity did not reach statistical significance, namely awareness (b 0.96, p 0.34) and
trust associations (b 0.06, p 0.27). As hypothesised, perception of value (b 0.12,
p 0.002) and loyalty (b 0.86, p 0.0000) are positively related to brand equity, the
Standard Composite Average variance

Dimension Items Loadings t-value error reliability extracted
(a)
Awareness q1 I know what [X online business] looks like 1.0
q2 I can recognise [X online business] among other
competing online businesses 0.86 * 29.11 0.036
q3 I can quickly recall the name of [X online
business] 0.87 * 18.98 0.040
0.89 0.72
Association value In [X online business] I can find the lowest
(a)
q5 prices for a quality brand 1.0
q6 I like [X online business] because one can find
the broadest range of products 0.82 * 17.89 0.061
q7 I have a preference for [X online business]
because it allows the comparison of product
prices across online stores 0.79 * 17.27 0.054
0.83 0.63
Association trust [X online business] has my confidence
(a)
q22 1.0 1.0
q23 It feels safe to conduct transactions in [X online
business] 0.90 * 23.91 0.040
0.90 0.81
Loyalty q24 It makes sense to buy from [X online business]
instead of any other online business, even if they
(a)
are the same 1.0
q25 Even if another online business has same
features as in [X online business] I would prefer
to buy from [X online business] 0.87 * 24.065 0.038
0.90 0.81
online companies
statistics
Measurement model
Brand equity for
731
Table II.
MIP latter being the strongest direct determinant of brand equity followed far behind by
26,7 value perceptions.
Indirect effects of brand equity sources on brand equity. According to the SEM
output, awareness, although not producing a statistically significant direct effect on
brand equity, does have an indirect statistically significant (0.46, p 0.0000) cascading
effect by affecting trust, value and loyalty. Brand trust association, although it did not
732 contribute directly to explain brand equity, does have a significant indirect effect on it
(0.59, p 0.0000) by influencing loyalty. When the total effect of trust is taken into
consideration, its influence on brand equity is close to the impact of loyalty.
Squared multiple correlations for structural equations indicate the brand equity
variance explained (R 2) 0.86 is derived from the relationship with trust and value
perceptions. The explained variance of loyalty (R 2) 0.59 can be accounted for, to a
large extent, by the construct trust, and to a lesser extent by value perceptions. The
construct value is explained (R 2) 0.60 to a large extent by associations related to
recall and awareness of the brand. Finally, the trust construct (R 2) 0.19 is not
explained much by perception of value and awareness, indicating that other variables
could contribute to explaining it.
The cross-validation of the final structural model was conducted in a similar fashion
as the one performed on the measurement model. The difference, Dx 2 24.2 with
14 degrees of freedom, has a p value 0.043, which is not statistically significant at
p , 0.05, implying that a tight replication of the model works well under strict
conditions.
Discusssion and implications

Recapitulation
In the current research, we studied the applicability of a traditional brand equity model
based on customer awareness and product associations. We found support for this
conceptual framework to certain extent.
The overriding goal of this research was to test a brand equity measurement model
for online companies based on a traditional conceptual framework borrowed from
Aaker (1996). Four sources were hypothesised to create brand equity: awareness,
associations of value, trust and loyalty. It was hypothesised that brand equity
expressed both as the willingness to pay a price premium for shopping on a particular
online business web site versus another less well-known web site, and by the intention
to repurchase from that web site would be influenced by consumer awareness of the
branded web site, perceived value and trust associations with the business, and loyalty
towards it.
H1 Awareness ! Brand Equity (BE) g 0.96; p 0.34 Not supported

H2 Value ! BE b 0.12; p 0.002 Supported
H3 Trust ! BE b 0.06; p 0.27 Not supported
H4 Loyalty ! BE b 0.86; p 0.000 Supported
H5 Awareness ! value g 0.78; p 0.000 Supported
H6 Awareness ! Trust g 0.25; p 0.007 Supported
Table III. H7 Value ! Trust b 0.21; p 0.007 Supported
Summary of structural H8 Trust ! Loyalty b 0.65; p 0.000 Supported
model hypotheses H9 Value ! Loyalty b 0.18; p 0.000 Supported
Contrary to the expectation brand awareness does not contribute to creating brand Brand equity for
equity directly (H1), but only by influencing other associations customers make with online companies
the brand (specifically associations of value and trust). The results are surprising given
that Aaker (1991) and Keller (2003) postulate brand awareness as the cornerstone of
brand equity. These results show a discrepancy with Yoo et al.s (2000) finding of a
weak, but statistically significant relationship between brand awareness/associations
and brand equity. On the other hand, Srinivasan et al. (2005) found that brand 733
awareness contributed to brand equity the largest when predicting brand equity for
mobile phone companies. Perhaps, the over-importance of awareness in the Srinivasan
et al., study is due to a bias in the data elicitation from asking respondents a
hypothetical question on the relevance of advertising. After all, ask someone in

marketing about the value of advertising (beyond sales) and they will answer along the
lines of brand awareness.
Perhaps, the role of awareness is critical in creating brand equity for brands that are
just being introduced in the market however, its importance declines as consumers
become totally aware of the business. In this latter case, spending on media and
focusing only on image rather than generating traffic, is a recipe for failure as noted by
Mark Andresen, developer of Netscape (Ilfeld and Winer, 2002). Notwithstanding the
arguments above, the relevance of awareness as a source of brand equity cannot be
underrated because of its statistically significant effect through trust (0.16), loyalty
(0.42) and brand equity (0.46).
Although it may be common sense that customers must previously be aware of a
brand to even consider it in their evoked set (let alone to purchase it), some have found
that awareness and recall are not significantly related to brand equity (Washburn and
Plank, 2002; Faircloth, 2005; Bravo Gil et al., 2007).
Specifically, related to e-commerce, Low (2000), in a report on the relevant factors
comprising the value creation index (VCI), concluded that building brand awareness
had no statistical association with market value. The most important value drivers for
e-commerce companies were the number of alliances and partners; next came
investment in innovation; and, finally, the companys web site viewing (traffic).
The data in this research support the view that, although consumers have a
relatively high degree of awareness and recognition of a brand, this does not
necessarily create brand equity (Graebner-Kraeuter, 2002) directly. However, it does
contribute to recall the brand as perceived offering value and trustful.
Perceived value association of an online business appears to be a relevant source of
customer-based brand equity both directly and indirectly, thus supporting H2. Value
associations, being a more specific evaluative construct than loyalty, also influence
brand equity through loyalty and trust. The finding in this research corroborates that a
strong brand (i.e. one which provides product and services that customers truly value)
creates trust (H7 ) and loyalty (H9), which in turn creates brand equity (Reichheld and
Schefter, 2000; Singh and Sirdeshmukh, 2000; Chaudhuri and Holbrook, 2001;
Gommans et al., 2001; Sirdeshmukh et al., 2002; Harris and Goode, 2004; Pitta et al.,
2006). Although loyalty mediates the effect of value on brand equity, value continues to
have a direct residual effect on brand equity that is statistically significant.
A note of caution is necessary here. Perceived value, as reported in the literature and
as originally conceived in this study, has various dimensions apart from value as the
ratio of price benefit. However, exploratory and later confirmatory analyses
MIP suggested deletion of some variables for a better fit. Some of the items related to
26,7 shopping convenience, customer advice and depth of product availability did not
contribute to Cronbachs alpha, thus reducing the reliability of these measures in
reflecting perceived value. This was perhaps because they were not correlated with the
price/value trade-off or perhaps since price is an extrinsic cue, it is more readily
accessible because it is observable and comparable (Zeithaml, 1988). Furthermore, the
734 functionality of being able to compare prices and the broadest range of products in
one place are also perceived as valuable. Hence, all three variables become more
representative for customers than other cues that are maybe more difficult to evaluate.
Notwithstanding, the previous reasoning, one can rightly argue that the variables
used to describe the value construct do not adequately assess the construct entirely. On
the other hand, the use of multiple items to measure a construct is arguable. Agarwal
and Rao (1996) indicate that it may not be necessary to subject respondents to difficult
questions to obtain accurate measures of brand equity. Simple, appropriately worded,
single-item scales may do just as well. Bagozzi and Dholakia (2006) used one and two
variables to measure constructs such as brand identification, social identity, group
behaviour, evaluative and social identity, subjective norms, etc.
Trust association with a brand, unexpectedly, does not have a direct effect on brand
equity (H3), but only an indirect one through loyalty. This effect, however, should not
be underestimated, because it accounts for almost the same proportion (0.59) of the
direct effect loyalty has on brand equity. There is no surprise that so much research
has been devoted to studying this construct, especially in the online environment.
Trust has been deemed crucial for online businesses because of the computer-mediated
environment in which they operate. Here, customers cannot physically inspect or touch
a product, nor can they see the salespersons gestures (Reichheld and Schefter, 2000).
Without trust, e-commerce development will not reach its potential (Yang and
Peterson, 2004).
This research provides support for previous claims of a relationship between trust
and loyalty (H8) (Sirdeshmukh et al., 2002; Baldauf et al., 2003). It also provides
theoretical support for trust associations with brand equity (Keller, 2003). It has been
noted that strong brands are a safe place for customer, and that this safety can be
cultivated by associating their brands with trust (Aaker and Joachimsthaler, 2000,
p. 17). This study corroborates the importance of this construct in building brand
equity. It is not an overemphasis to say that trust is the new Colossus, because it is the
total of what is left behind once an online company has advertised, sold and serviced a
product. While image belongs to a brand, a brands trust belongs to its customers. This
is especially the case in an open computer-mediated environment like the Internet.
Customer loyalty has been a widely-researched topic in marketing because it is
considered an important company goal. In e-commerce particularly, loyalty is deemed
a major driver of success (Davis and Dunn, 2002) and even more valuable than
offline because of the higher costs of acquiring customers (Yoo et al., 2000; Yang and
Peterson, 2004). The findings from the present study confirm its importance in creating
brand equity (H4). Loyalty is the most important driver of brand equity online. In
regression terms, an increment of one unit of loyalty has an increment in brand equity
of 0.73 units. This finding is consistent with models of brand equity developed by
Baldauf et al. (2003); Yoo et al. (2000), and Keller (2003) and reinforces Aaker and
Joachimsthalers (2000) assertion that brand loyalty is at the heart of a brands value.
Moreover, this finding ratifies the importance of managing loyalty as part of the Brand equity for
brand management strategy (Page and Lepkowska-White, 2002; Christodoulides and online companies
Chernatony, 2004; Oloughlin, 2006). Hence, companies are well advised to design
strategies to build trust and loyalty to enhance brand equity. Consistent with the
literature reviewed, loyalty explained variance (R 2 0.59) is driven mainly by trust,
and value to a much lesser extent (Carpenter, 2000).
This study, although it cannot prove causality, does confirm the hypothesised 735
hierarchical effects of brand equity sources (Harris and Goode, 2004; Bart et al., 2005).
Brand awareness influences the association of value (H5) and trust (H6) that customers
make about a brand and, in turn, these associations influence loyalty, which ends up
directly creating brand equity.
Conclusion
This study finds partial support in defence of the application of the offline brand equity
theoretical framework based on brand awareness, brand associations and loyalty for
online companies. Brand loyalty and brand value associations directly create brand
equity. The results in this study are supportive of the view that consumers perceived
sense of value resulting from a transaction with an online business develops in loyalty.
Also, brand trust association and brand awareness indirectly contribute to creating
brand equity through their influence on loyalty. Loyalty is by far the most important
source of brand equity because of its direct influence and mediating role in creating
brand equity.
The study has implications for practitioners who are interested in managing brand
equity. First, it appears that value and loyalty are the two most important factors in
creating brand equity. Hence, managers are advised to identify what constitutes value
for their consumers vis-a`-vis their competitors. In this research, consumers perceive
value of online companies in the availability of a broad range of products, value for
money, and a tool that allows them to compare prices. Second, although trust did not
directly create brand equity, we suggest they are of significant use to a brand manager.
Our study demonstrates that this factor has a strong influence on loyalty a
cornerstone of brand equity. The same rationale for trust applies to developing
marketing activities to create awareness and recognition of a brand. Once consumers
have reached a threshold of awareness and recognition of the brand, the companys
effort should move to communicate value and reinforce loyalty.
Contribution of the study

The study offers contributions to both academia and business in several ways.
To date there has been speculation that this theoretical framework could apply as
well to online businesses as it does to traditional ones. However, few research studies
have tested the model explicitly. Secondly, while many studies have identified and
ratified the importance of brand equity dimensions among traditional firms and have
hinted at the hierarchy of effects, few have identified these dynamics. Thirdly, this
research not only supports earlier studies that argue that trust is central to exchange
but, more importantly, it adds support to those who contend that trust may be even
more important in a computer-mediated environment. Given the importance of trust in
creating brand equity, this study may also contribute by providing an avenue to
explore brand equity outcomes from a relational perspective. While a number of
MIP studies have begun to highlight the importance of trust, especially in the
26,7 relationship-marketing paradigm, there is little evidence of this effect in relation to
brand equity, but more in creating brand equity for online companies. Finally, the rise
of the retailer as a brand is one of the most important trends in retailing and this may
be more so, on the Internet. This research contributes in an understanding of the image
of the online business as a brand and its value.
736
Study limitations
Despite these contributions, we acknowledge the limitations of this research. Care must
be taken when extrapolating our findings to other types of brand communities, such as
those that are predominantly virtual. The survey method we used collected all the
measures only once and, comparing the proposed model against that of rival ones, its
results must still be interpreted with caution.
This research posed some challenges common to social science research and is
subject to some limitations.
The study may have limited generalisations by the use of students. This purposeful
sample will certainly not reflect a sample of the whole population. However, as justified
in another section of this manuscript, this sample may be appropriate for theory testing
and development. Besides, the population studied does purchase products from the
online companies.
Because this study is cross-sectional and there was no variable manipulation, it is
not possible to draw cause-effect inferences; therefore the findings must be interpreted
with caution.
The indicators or observable variables that were used in this study may not be
deemed comprehensive enough. Even when scales may have proved reliable in some
studies, it may not necessarily be the case in others.
This study has not incorporated interaction effects. Potential interactions among
the sources of brand equity such as trust and loyalty on brand equity outcome could
provide additional insights.
This research study was based only on a few online business retailers. Although the
theoretical framework based on brand associations, awareness, and loyalty tested here
seems robust enough, brand equity sources could have a different impact on brand
equity when studying other online businesses (e.g. portals and verticals).
It is possible that the study suffers from some common methods bias since the same
subjects report on their perception and attitude of online companies and at the same
time on the brand equity outcome measures.
Note
1. An interesting observation to bear in mind when deciding on price premium as a measure of
brand equity is raised by Ailawadi and Keller (2004, p. 340). They observe that several of
the strongest retailers today, e.g. Wal-Mart, Target, Aldi, are built squarely on a low price
positioning. This presents a complication when studying brand equity for these types of
retailers that obviously have brand equity regardless of lower (rather than premium) prices
than the competition. In these cases, brand equity must be assessed in a different way.
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Further reading
Brynjolfsson, E. and Smith, M. (2001), The great equalizer: consumer choice behavior at internet
shopbots (Draft): MITo. Document Number.
742
Corresponding author
Hernan E. Riquelme can be contacted at: hernan@kmbs.edu.kw
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Brand equity for online companies

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Brand equity for

Accepted 1 July 2008

Theoretical framework and hypotheses

3.1 per cent premium for a brand name.

Brand association: value

characteristic of organisation associations as one among many others, thus

H6. Positively related to association of trust.

Participant recruitment and sample

Online brand equity measurement model

0.37 q7 trust 1.00 0.46

0.14 q24 0.87

Structural model estimation

Standard Composite Average variance

Discusssion and implications

H1 Awareness ! Brand Equity (BE) g 0.96; p 0.34 Not supported

hypothetical question on the relevance of advertising. After all, ask someone in

directly creating brand equity.

Contribution of the study

Christodoulides, G. and Chernatony, L.d. (2004), Dimensionalising on-and offline brands

Suppehellen, M. and Nysveen, H. (2001), Drivers of intention to revisit the websites of

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